Confusion as State-Owned Insurer Aims for Second-Biggest IPO After Facebook

A $6 billion listing of a giant Chinese state-owned insurer is taking on new twists and turns as bankers gear up for an increasingly taxing deal.

In addition to previous demands that already have raised eyebrows among bankers, People’s Insurance Co. (Group) of China Ltd. is now asking banks that want to be on the deal to seek so-called cornerstone investors, according to people familiar with the matter.

Cornerstone investors, who would be named and agree to hold shares for a certain length of time, are seen as a way to give prospective buyers confidence in many large Asian initial public offerings. PICC plans to list its shares in both Hong Kong and Shanghai, and it could be the world’s second-biggest IPO this year after Facebook Inc.

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Last week, 17 banks were each asked to come back with a commitment letter on the size of investments it can bring in from cornerstone investors—a key criteria for PICC as it decides on which banks it will hire for an IPO that it wants to wrap up in just two months. But the first discussions between all the banks and the insurer during a meeting in Beijing on Monday has already sparked confusion over the details.

Four people familiar with the matter said Goldman Sachs Group Inc. has agreed to bring in cornerstone investments of $2 billion, or around a third of the deal, considered an impressive amount for a single bank, especially given weak sentiment among investors as markets falter worldwide.

Other people familiar with the matter said bankers misunderstood Goldman’s commitment and the $2 billion referred to the total that Goldman thought all the banks together could pull in from cornerstone investors, and that each underwriter would fill an equal portion of the cornerstone tranche.

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